On: December 09, 2014 In: Blog Comments: 0

Japan

By Michael Kodari

Australia has finalised a free trade agreement with Japan that will see a fall in prices for consumers on everything ranging from electronic equipment to Japanese tea! Japanese Prime Minister, Shinzo Abe, arrived in Australia on 7th July, 2014 which marked the first visit by him or any Japanese leader in 12 years. The agreement he signed with Prime Minister Tony Abbott has been designed over the past 7 years, and it is aimed at providing Australia with valuable access to the massive Japanese economy.

With a population of 127 million people, Japan is already Australia’s largest trading partner and owner of over 11 per cent of the world trade. As liberalising as this agreement sounds, it is clear that Australians know what they are going to get out of it. Consumers If you are looking to purchase a new car or a brand new laptop, it is better to hold off for now, until the agreement comes into effect. The most prominent benefit for Australians will be less costly electronics made in Japan. According to a well-known international business professor, the education, tourism, and health sectors will benefit the most from this agreement.

Moreover, people who love Japanese cars and want them at cheaper rates will also be at an advantage. As the agreement strips away many barriers to trade, it will make trade easier and cheaper. Business Owners This free trade agreement is expected to be a never-ending treasuretrove for business owners, particularly in the services industry. Services like financial management, legal services, and telecommunication businesses could gain essential leverage from easier access to the Japanese market. Many business owners believe that the Japanese market will expand and grow for a number of Australians. There will be cheaper holidays and most importantly, a noticeable presence of Australian business.What will be more interesting is the arrival of Japanese industrial giants Mitsubishi, and Nippon Steel. According to Prime Minister Abbott, this agreement could create a large number of new job opportunities in Australia.

Industrial Exporters

A large number of Australian exports such as iron ore, coal, and liquefied natural gas are already under the Japan duty free category. However, over the next few years, other additions like coke, petroleum, and aluminium hydroxide will also be added to this duty-free list. This will create new opportunities for sharing natural resources with Japan and open the door to great future trade relations.

Beef Producers

Beef producers are among some of the biggest beneficiaries of this free trade agreement. Australian beef producers are set to have Japan’s standard 38.5 per cent tariff on frozen meat at 19.5 per cent. Additionally, fresh beef exporters are expected to see a 23.55 per cent cut in tariffs over the next decade.

Dairy and Food Products

This deal will bring outstanding trade benefits to the Australian dairy and food industry. With duty free access to dairy products like cheese, the $372 million dairy industry is bound to see further improvement. Moreover, there are tons of opportunities for ice cream and yoghurt producers.

Not just the dairy industry, the free trade agreement has a lot in store for other food products as well. The massive Australian sugar market

will also witness reduced levies, while tariffs on canned foods will be eliminated. Bulk wine, seafood and vegetable oil exporters will also experience 0tariffs while all the chocolate exporters in Australia will be able to enter Japan duty free.

Automotive Industry

For people who love Japanese made cars, the free trade agreement is the perfect treat. Up to 5 per cent tariff will be cut off on Japanese made cars thus reducing Japanese car prices by a whopping $1500. On the other hand, Australian car manufacturers will now be able to compete on a completely new level, i.e. a global market.

Final Word

Whether it is cars, electronics, or even sushi, the free trade agreement is bound to bring a lot of benefits to Australia and the consumers in this country. This agreement will open the doors to a new relationship that could bring growth and development to both Australia and Japan.

Moreover, a large number of mergers and acquisitions are also expected to take place.

Michael Kodari is the managing director of Kodari Securities (KOSEC).